Account servicing refers to the handling of loan administrative matters between the time of disbursement of credit facility to the time of full repayment.
This is understandable as account for customers don’t open until a loan is approved by approvers and accepted by borrowers.
Most people don’t realize that when they call up their banks these days that the people on the other end of the line are not employees of the bank even though they don’t speak with an unfamiliar accent.
While many lenders hire their own staff to do account servicing work, many more sign up third party account serving agents to do the pesky job of customer service.
These agencies do anything from:
- Handling general inquiry calls
- Track the timeliness of repayments
- Charge late payment fees and other penalty fees on borrowers
- Generating statements for customers
- Help pay for taxes and insurance
However, even though that are experts or some would call specialists, customer experience can sometimes leave a lot to be desired.
A big reason for this is that, as mentioned before, it is seldom the case where a lender who a borrower borrowed from is the one servicing the account.
In addition to that big service providers often service a host of loans from different originators. They acquire business by bidding for these jobs.
They are not remunerated by borrowers. So there really is no incentive to provide quality service to borrowers.
This also means that a borrower has little say, if any, to choose the servicing agent to work with.
The only way to fire a servicing agent is to close the loan with a full settlement, or to refinance the loan with a new lender.
Even then, refinancing with a new lender can start the whole servicing circus all over again with no significant positive change in user experience.
One of the most common reasons we call up account servicing personnel is for annual fees and late payment charges.
Some companies can practice predatory servicing by not informing borrowers of these charges in a timely manner. Leading to a borrower blotting his credit record.
For example, if a borrower is charged an annual fee and wasn’t made aware of it, the fee can be deducted from the next mortgage payment he makes, leaving the remainder insufficient to meet the full required payment. This effectively makes the payment late. With each following month, the payment is used to cover part of the previous outstanding balance. Soon the borrower will have a whole line of delinquencies in his credit report. And then there are the late payment fees to contend with.
The worse thing is if a call to the servicing agent is made at this point, we are probably going to have to listen to why they are right because their policy said so and that there “nothing they can do”.
The borrower will then just have pay for everything or else face the consequences of having his credit mutilated.
As the only party servicing agent fear are the lenders (who are paying them), a borrower’s best recourse is to contact the lender to file a complaint.
When doing so, include:
- Loan account number
- Property address
- Why you are making the complaint
Under RESPA, lenders have a certain time frame to acknowledge and respond to these requests.
If you fail to get a favorable response from the lender, it’s time to go to a bigger authority.
Government agencies regulate the operations of servicing agents. So do find out which one is relevant to you and write to them about your grievances.
Prevention of being victimized
Seeing how this can be a pitfall that we can potentially never crawl out of once we get in, the best course of action is to prevent it from happening in the first place.
Some of the preventive steps a borrower can take are:
- Request for annual statements if it has never been sent
- Reference interest rates on ARMs with index rates to ensure that they are correct
- Check balances to ensure that they are right
Remember that even though an agent’s job is to service the account, it is a borrower’s job to ensure that he is not taken for a ride.
Because of how unsatisfied borrowers generally feel about servicing agents, we could be seeing more “second tier servicers” entering the market and making their presence felt.
They operate like a middleman and would be sandwiched between borrowers and primary servicers.
Borrowers would pay these companies to do the tasks associated with account servicing, and in return, they would expect a much higher level of quality service.